Thursday, June 22, 2006

Do you wonder why the unemployment rate seems to be pretty good, but a whole lot of people you know aren't working and aren't finding work? That's because the unemployment rate doesn't really mean what most of us think it means. Ian Welsh over at FireDogLake explains.

Here is his conclusion:

Forget the unemployment rate – look at the labor force participation rate or the employment/population ratio.

Because the working age population of the US is going up every month, the job market must create jobs just to stay even. Roughly 150,000 jobs a month. If it creates less than that, consider things to have gotten worse.

The Establishment survey is more accurate than the household survey. If the gap between the two surveys is decreasing that’s usually good. If it’s increasing, that’s usually bad."

Look especially at item #2. If the economy creates fewer than 150,000 jobs each month, things are getting worse. Remember this the next time the Republicans announce that under their regime some number of jobs have been created. Convert that number to a monthly number, subtract 150,000 and every negative result is a bad month.